The World Bank raised its forecast for economic growth in the Middle East and North Africa amid lower-than-expected tariff increases and boost in oil production.

Economic activity in the Middle East and North Africa is forecast to grow by 2.8 per cent this year, 0.2 percentage points higher than the World Bank's April forecast. The region's 2026 economic forecast was revised downwards by 0.4 percentage points to 3.3 per cent.

Economic growth in the Gulf region is forecast to increase by 3.5 per cent this year, higher than the April estimate of 3.2 per cent, and up from 2.2 per cent in 2024. It is expected to rise 4.4 per cent in 2026. The World Bank anticipates countries in the Gulf to benefit from the phasing out of voluntary oil production cuts and growth in the non-oil sector.

The UAE's gross domestic product is projected to increase at the fastest pace in the Gulf this year at 4.8 per cent (up from the April estimate of 4.6 percent) before expanding by 5 per cent in 2026. Saudi Arabia (3.2 per cent), Qatar (2.8 per cent), Kuwait (2.3 per cent) and Oman (3.1 per cent) were all revised upwards for 2025, while the World Bank held its growth forecast for Bahrain at 3.5 per cent.

The lender also said it expects stable growth in the UAE over the medium-term amid broad-based economic activity – with contributions from financial services, construction, transport and property.

In contrast to the Gulf, the Washington-based institution cut its growth for developing oil exporters Algeria, Iran, Iraq and Libya to 0.5 per cent this year, down 0.3 percentage points from its April estimate, largely as a result of tighter sanctions on Iran and a contraction of oil exports from the country.

The World Bank also increased its forecast for the region's oil importers to 3.7 per cent – up 0.5 percentage points from April – this year citing private consumption and investment, as well as a boost in agriculture and tourism.

Meanwhile, World Bank estimates for regional economies severely affected by conflict (Afghanistan, Lebanon, Syria, West Bank and Gaza, and Yemen) have been revised upwards since April.

“Yet, alongside these improved numbers are persistent, overlapping challenges,” the report said. “Conflict and displacement, as well as water and food stress, continue to shape an unfinished development agenda. Moreover, with the working-age population outpacing job creation, the region stands at the heart of the global jobs challenge.”

The World Bank's upwards revisions for the broader Mena region mirror the global economy, now projected to grow by 2.3 per cent – which could be its lowest level since 2008 but still an increase from the World Bank's April forecast.

“Forecasts for the global economy have been revised upwards since April, as policy uncertainty has declined – although it remains elevated compared to January,” the World Bank said.

Trade uncertainty has dominated the global economy this year following US President Donald Trump's sweeping tariffs policies.

While Mr Trump has not yet announced trade deals with its three largest trading partners – Canada, China and Mexico, he has touted deals struck with several other countries that the US has a trade surplus with and sent so-called trade letters to hundreds more.

The World Bank said trade uncertainty is unlikely to have a major impact on the region's exports and growth, indicating its export patterns.

“Changes in oil prices, however, are likely to result in more important growth impacts, especially among oil exporters,” the report said.

The World Bank's latest forecasts come days after Opec+ agreed to raise oil production by 137,000 barrels a day in November, similar to the levels it had agreed to for this month.

Lower demand because of trade tension and the announcements of Opec+ unwinding production cuts have kept oil prices volatile this year.

The World Bank expects Brent, the global benchmark for crude, to average roughly $69 a barrel this year as of September 22, sharply down from the 2025 average of $80.

The report expects oil prices to remain at approximately their current level over the next two years, with December 2027 futures trading at $65.5 a barrel. Supply growth among Opec+ and non-Opec countries, alongside weak growth demand, underpin the medium-term decline of oil prices, it said.

Gaza situation is dire

The World Bank also said conflict remains a point of “immense suffering in the region”, especially in Gaza, and that it remains a significant constrain on economic activity. Trade disruptions and displacement of people also have a negative impact on non-conflict-affected countries.

The report, which comes on the second anniversary of the war, which began on October 7, noted the enclave continues to face a severe economic and humanitarian crisis as it remains faced with food, water and medical supply shortages.

“Two years into the conflict, Gaza’s health system has been critically impaired,” it said.

Economic activity in Gaza was almost non-existent in mid-2025. Its GDP fell by an additional 12 per cent in the first quarter this year following a contraction of 83 per cent in 2024.

Spillover effects from the Gaza War have also affected economic conditions in the West Bank. The World Bank projects the economy of the West Bank and Gaza to grow by 3.9 per cent this year, although noted it “primarily reflected a low-base effect, and a rebound in private consumption attributable to a modest increase in the number of Palestinian labourers in Israel”.

More female labour participation

Women's skills remain “significantly underutilised” in the region, the World Bank said, with uneven progress across countries.

While Saudi Arabia's female labour participation force rose from 20 per cent to 34 per cent over the last 10 years, that of Egypt, Iran, Jordan and Morocco either declined or stagnated.

The report also said regional economies have not done enough to generate jobs needed to capitalise on the growth of its working-age population. The World Bank called for a broad set of changes including legal reforms and affordable child care.

“To unlock the full potential of women in the region, we must tackle every barrier to their inclusion with comprehensive measures,” said Ousmane Dione, vice president for the World Bank’s Middle East, North Africa, Afghanistan and Pakistan region.